100 billion to subserdise energy bills over two years

[martinW]

Heard this on the news yesterday. Basically if the government was to cap the domestic energy bills from October's energy price cap it would cost the tax payer 100 billion over the next 2 years.

To put that on context we spent around 65 billion on furlough...

How much renewable generation could 100 billion, or even 50 billion pay for?

Where is the money going to come from?

[Oldgreybeard]

The money could come from the massive profits that the energy generation companies are making on the back of the higher prices they are getting. The costs haven't really increased for electricity producers, with the exception of the higher price that around 38% of them are paying for gas and the cost of living impact on their wage bill. Almost all the additional money consumers are paying for electricity is pure profit for those companies that aren't burning gas, because of the daft way the market has been rigged by the government.

[Moxi]

Agreed, if the government subsidised the spinning reserve unit costs (normally gas fired) then this would reduce the overall wholesale market price and bring the cost to households down significantly.

it smacks of the government and the mandarins not understanding the market that they installed!

Moxi

[Oldgreybeard]

Agreed, if the government subsidised the spinning reserve unit costs (normally gas fired) then this would reduce the overall wholesale market price and bring the cost to households down significantly.

it smacks of the government and the mandarins not understanding the market that they installed!

Moxi

The government rarely seem to understand markets that they interfere with, I think. In just about every case I can think of government intervention in various markets has resulted in obvious issues that anyone with half a brain cell could have predicted. Subsidies is probably the best example, ranging from all the various rip-offs resulting from things like insulation grants though to grossly distorted farming practices resulting from the way the CAP was interpreted/implemented. The electricity market is just plain daft - tying the price paid to all generators to the one generator that holds their nerve and bids at the last minute to supply at a very high price is beyond bonkers, it's simply completely mad.

I wonder how much covert dealing is done behind the scenes to rig things to maximise the price? I wouldn't mind betting that this goes on every day. The temptation to try and fiddle the bidding process so that all the low cost producers maximise their income has to be absolutely massive. I remember watching an old film about the way the CEGB managed supply to meet demand, essentially lots of people phoning around and arranging generation to ramp up or down at set times based on as much forecasting data as they had. I bet the same thing goes on behind the scenes now, with covert calls telling low cost producers to hold off bidding until the market for that slot has hit the highest price it can. Holding back ups the price, so there is a natural tendency for this system to make all the producers that can refuse to bid until the last minute.

[Stinsy]

Where is the money going to come from?

Us lot!

We always end up paying through taxes, bills, or whatever!

[Mr Gus]

Lads, face it, if the uk government are too gutless to take the recent illegal sacking of ferry workers scenario to court, & knock the owners around, then it sets a new precedent of big companies being able to sh1t from great heights on employees & non investors of the company (customers).

https://www.bbc.co.uk/news/uk-62613625

So yeah, instead of tackling energy, a big switcheroo takes place that we all pay for over years, whilst it decimates small businesses, closes pubs & causes more poverty, (not that my local was a place of warmth unless it was a hot day) ..so energy pricing & shareholder pay out pretty much carries on as before..

Pubs, chippies, all sorts of trades that just about got through covid shutdown are being hit by unaffordable energy rises & stock costs spiralling.

In the meantime, scraps for pay rises before, & real term monetary losses over years for many, & treated as scum by govt for not wanting to lose further ground where pay is concerned it is untenable.

Hard times.

[nowty]

I think the most likely solution is 20 year loans to the energy suppliers (preferred option from the suppliers) which will be paid back slowly when energy is cheaper. So the bill payer will eventually pay and it will keep energy prices high for a very long time.

[Bugtownboy]

But isn’t that the long game to drive down useage ? Arguably, energy costs have been too low and, as a society, we’ve been to profligate with its use.

Not trying to, in anyway, minimise the impact that many families (and businesses) are going to feel this winter.

[Oldgreybeard]

I think the most likely solution is 20 year loans to the energy suppliers (preferred option from the suppliers) which will be paid back slowly when energy is cheaper. So the bill payer will eventually pay and it will keep energy prices high for a very long time.

There is a way this could play out reasonably well, without grossly inflating future energy bills. The production cost of electricity is dropping for wind and solar, although not for gas or nuclear, so as more wind and solar comes on stream the overall production cost should drop.

This opens up the possibility of repaying loans from just the drop in production cost margin, rather than adding to bills to make them higher overall. Clearly consumers are paying, but the impact may be a lot less. The really big problem seems to be the gross imbalance in production cost between producers that are required to make electricity available when needed, at a fairly high cost, and producers for which cost isn't directly linked to the amount of power they are delivering.

[chris_n]

I think the most likely solution is 20 year loans to the energy suppliers (preferred option from the suppliers) which will be paid back slowly when energy is cheaper. So the bill payer will eventually pay and it will keep energy prices high for a very long time.

There is a way this could play out reasonably well, without grossly inflating future energy bills. The production cost of electricity is dropping for wind and solar, although not for gas or nuclear, so as more wind and solar comes on stream the overall production cost should drop.

This opens up the possibility of repaying loans from just the drop in production cost margin, rather than adding to bills to make them higher overall. Clearly consumers are paying, but the impact may be a lot less. The really big problem seems to be the gross imbalance in production cost between producers that are required to make electricity available when needed, at a fairly high cost, and producers for which cost isn't directly linked to the amount of power they are delivering.

They would have to change the way the market works to achieve that, after all the only reason the costs are as high now is because all sources of energy are sold at the same price.